Allied Domecq is the UK andthe world's second largest spirits group (see Table 1 below). But it has been in theshadow of Diageo for some time - never seeming to be able to follow the lead set bythe merger between Grand Metropolitan and Guinness group. This may be about to change.

Allied Domecq is apparentlyworking towards splitting off its leisure interests (pubs and fast food) and letting thespirits group have its head. The spirits brands such as Beefeater Gin, Teacher'swhisky, and Sauza tequila may then be looking at a merger with another spirits group likethe US group Seagram.

The papers and trade presshave been buzzing with speculation and comment this week about what might happen withAllied Domecq and when, how and who it will all be happening with. If a demerger of thepubs side goes ahead we can expect that it will be part of a merger with another spiritsgroup to create a rival to Diageo. Senior executives are being widely quoted as beingconvinced of this logic. Perhaps it doesn't matter whether they are or not becausecity analysts are being even more widely quoted on their views of the need to do somethingto rescue Allied Domecq's share price slide - down by 150p since April 1998.Allied Domecq 's share price is now below 500p per share compared with 700p forDiageo. Something has got to give.

Table 1: Summary of UK Drinks CompanyResults (3 year average)

Capitalisation

Sales

Profit

Profit/sales

Years

Company

£m (a)

£m

£m

%

Grand Metropolitan PLC (b)

10,099

7,895

654.0

8.3

1994-96

Allied Domecq PLC

4,937

6,248

556.7

8.9

1995-97

Bass PLC

6,639

4,968

582.3

11.7

1995-97

Guinness PLC (b)

8,952

4,700

922.0

19.6

1994-96

Scottish & Newcastle PLC

3,766

2,780

264.3

9.5

1995-97

Whitbread PLC

3,280

2,749

288.0

10.5

1995-97

Matthew Clark PLC

401

440

15.5

3.5

1995-97

Bulmer (H P) Holdings PLC

277

272

26.6

9.8

1995-97

Highland Distilleries PLC

468

189

41.0

21.7

1995-97

Burn Stewart Distillers PLC

52

58

2.8

4.9

1995-97

Glemorangie PLC

127

40

6.7

16.7

1995-97

Merrydown PLC

10

32

0.0

0.2

1995-97

Average weighted by sales

573.5

11.1

Straight average

280.0

10.4

Total sales

30,373

 

Source : Hemmington Scott, Euro PA

Note : The companies have been rankedaccording to sales value.
(a) The figure quoted for Market Capitalisation varies depending on the status of thecompany. The average market capitalisation for the period covered is quoted in the case ofpublicly listed companies (PLCs). In the case of private companies or subsidiaries ofpublic companies the figure quoted is the average capital employed.
(b) Grand Metropolitan and Guiness merged to form Diageo in December 1997.


This article was kindly provided by Dr John Strak,Euro PA & Associates